THE EVOLUTION OF ACCOUNTING INFORMATION SYSTEMS
(2015)

Technological evolution becomes more and more a daily reality for businesses and individuals who use information systems as for supporting their operational activities. This article focuses on the way technological evolution changes the accounting practices, starting from the analysis of the traditional model and trying to determine future trends and arising challenges to face. From data input to consolidation and reporting, accountants’ function and operations are dissected in order to identify to what extent the development of new concepts, such as cloud computing, cloud accounting, real-time accounting or mobile accounting may affect the financial-accounting process, as well as the challenges that arise from the changing environment. SEA Practical Application of Science Volume III, Issue 1 (7) / 2015 92 Introduction Technology evolves rapidly as for responding to customers demand (Weiß and Leimeister, 2012). From a business perspective, more and more companies acknowledge the fact that technology may support process optimisation in terms of costs, lead time and involved resources. The actual market context is driving companies to continuously search for new ways to optimise their processes and increase their financial indicators (Christauskas and Miseviciene, 2012). The company’s efficiency is in direct relation with the objective and timely financial information provided by the accounting system, the main purpose of which is to collect and record information regarding transactions or events with economic impact upon the company, as well as to process and provide relevant, fair information to stakeholders (both internal and external) (Girdzijauskas, et al., 2008; Kundeliene, 2011). The accounting system is thus essential in providing reliable, relevant, significant and useful information for the users of financial data (Kalcinskaite, 2009). From the deployment of basic accounting program or the use of large ERP systems (Enterprise Resource Planning), to the creation of World-Wide Web and development of web-based communication, technology increased its development in speed and implications. Today, concepts such as cloud computing, cloud accounting or real-time reporting are more and more a daily reality among companies. But as technology evolves at an incredible speed, it is necessary for companies to adapt their processes and practices to the new trends. However, that could not be possible without the decision factors to completely acknowledge the implications of the new technology, how it can be used to better manage their businesses and what challenges it also brings along. The present study is based on the theoretical and empirical analysis of accounting process from the appearance of the first accounting information systems up to nowadays’ services and techniques available for supporting the accounting function of a company. The research comprised of analysing accounting operations, activities and practices as they followed the technological evolution for over than 20 years, focusing on a general level, applicable to companies of all sizes and business sectors. Although the geographic extent was limited to the European Union, the study may as well be considered globally applicable, considering the internationality of today’s technology (e.g. cloud computing services may be used by a company in Japan while the server is physically located in the USA). Traditional practices and future trends The accounting systems may be seen as aiming to support businesses in collecting, understanding and analysing the financial data (Chytilova et al., 2011). The evolution of software accounting generation may be split, according toPhillips (2012) into three major categories: ▪ 90’s era – marked by the apparition of the first accounting software programs under what is known as ‘the Windows age’; applications were solid, but only supporting basic accounting operations. ▪ 00’s era – ‘integration’ and ‘SaaS’ concepts took birth, bringing along more developed systems that would allow more complex accounting operations and data processing, as well as concurrent access to files and programs. ▪ 2010 – on-going – ‘Mobile’ accounting era, marked by real-time accounting, financial dashboards and other mobile applications supporting financial processing and reporting. The same author outlines the evolution of communication – if the traditional accounting model was based on e-mail or .ftp files communication, the technological evolution now allows sharing and concurrent access to data, through virtual platforms provided by cloud computing technology. Based on the types of accounting services available on the market, three major categories may be defined: ▪ On-premises accounting: a dedicated accounting software program is purchased by the company and installed using its own infrastructure. Investment in the software and hardware equipment is required for such programs. ▪ Hosted solutions: the logical access is remotely performed through the company’s installed programs; however the data centre is physically located in a different place, managed by a dedicated third party. Infrastructure costs are reduced for the company, as hardware is administered and maintained by the service provider. ▪ Cloud computing: the service could prove even more cost efficient for companies, as the data is managed through virtual platforms, and administered by a dedicated third party, allowing multi-tenancy of services in order to split fixed infrastructure costs between companies. Traditional accounting practices used to focus on bookkeeping and financial reporting, having as a final purpose the preparation and presentation of financial statements. The activities were driven by the need of financial information users (both internal and external) to gain a ‘fair view’ of the company. The objective was often SEA Practical Application of Science Volume III, Issue 1 (7) / 2015 93 reached through the use of small, atomic systems meant to support the reporting; nevertheless, collection of documents, processing of data and operations, posting of journal entries, as well as consolidation and final reporting operations were mostly manual, and manual controls (reconciliations, validations, etc.) were performed as systems did not communicate through automated interfaces. In early 1920s, the first outsourcing agreement was signed by British Petroleum with Accenture. Ever since, the accounting started changing its meaning within the companies, turning from the bookkeeping function to the management strategic and decision-making support function. The technological evolution gave birth in the late 80s to ERP (Enterprise Resource Planning) systems, used to incorporate and connect various organisational functions (accounting, asset management, operations, procurement, human resources, etc.) (Ziemba and Oblak, 2013). Ustasüleyman and Percin (2010) define the ERP systems as ‘software packages enabling the integration of business processes throughout an organisation’, while Salmeron andLopez (2010) see the ERP system as ‘a single software system allowing complete integration of information flow from all functional areas in companies by means of a single database, and accessible through a unified interface and communication channel’. The ERP systems became of common use among large companies who managed to reduce the process lead time and involved resources by automation of data transfer between ERP modules, processes within the ERP system, as well as validation and reconciliation controls. From an accounting perspective, the deployment of ERP systems represented a major change, offering support in bookkeeping (the operations performed through different modules would generate automated journal entries posting), processing and transfer of data (through automated interfaces between the ERP modules), as well as consolidation and reporting. This progress took the accountants one step away from the traditional accounting’s bookkeeping practices, and one step closer towards today’s role more close to management strategy and decision support. Further on, as a consequence of the financial-economic crisis started in 2008, the role of accountants within the company changed drastically from bookkeeping and reporting to playing an active and essential role in the management strategy and decision-making process. Thus, it was technology’s role to take in the traditional tasks and operations. More and more companies implemented automated controls for processing data, posting journal entries, consolidation and final reporting under the financial statements and other internal management reports. Soon after automating the accounting operations, technology evolved into also automating document collection and management, through development of concepts such as einvoicing, e-archiving, e-payments, etc. (Burinskiene&Burinskas, 2010). Technology proved once again responsive to the market’s demand, and thus accounting software easily customisable for each client’s particularities regarding the activity profile, accounting practices and chart of accounts, were built as for supporting the automation of accounting process. With the automation of the process, implementation of certain controls was also required as for ensuring the correctness and completeness of reported information. Technology also took into account the need for robust, transparent processes, and it was only a matter of time until cloud computing, cloud accounting or real-time reporting concepts became a daily reality among companies of all sizes, activity sectors or region/state. The access to financial information previously physically limited to the company’s premises (where the network and infrastructure would be located) was fairly improved through cloud computing to an extent where internet connection was the only condition users needed to respect in order to gain access to the financial programs and data. Cloud computing start